Price rigidity and market power in German retailing

Abstract

This paper presents empirical evidence on the interplay important topics of consumer price rigidity and market power in the German food retail industry. In particular, the analysis addresses the causal relationship between market structure-collusion-and pricing behaviour highlighted in the industrial organization literature. Extensive analysis of retail scanner data across beef and pork products reveals considerable differences in price rigidity across store types. Supermarket pricing behaviour is evaluated with respect to all price changes retail sales action and price adjustments indicating that food discounters exhibit the highest degree of rigid prices. Retail concentration, as an important explanatory factor of price stickiness is investigated via the analysis of retail market power employing a conjectural-variation approach. The analysis of market conduct in the marketing of beef and pork products indicates simultaneous oligopolistic and oligopsonistic behaviour of retail firms. Copyright © 2007 John Wiley & Sons, Ltd.

The transmission and management of price volatility in food supply chains

“…The most prominent factor is however the degree of market power in the chain (Meyer and Von Cramon Taubadel, 2004). Firms are shown to use market power to asymmetrically transmit output and input price changes or to keep output prices rigid in response to input price changes (Meyer and Von Cramon Taubadel, 2004;Weber and Anders, 2007). The effect of market power on price transmission has often raised concerns among policy makers due to its negative implication on the distribution of welfare among actors in the chain (Griffith and Piggott, 1994).…”

“…Concentration at the retail stage can have implications on price competition and transmission in the chain. Despite the high degree of concentration, the German supermarket industry is characterized by an intense horizontal price competition due to the presence of hard-discounters such as Aldi and Lidl Weber and Anders, 2007). The intense competition limits the opportunity for retailers to transmit cost price increases to consumers.…”

“…Hence, retailers mark-down the margins of the slaughterhouses and/or processors using oligopsony market power to maintain their own margins Weber and Anders, 2007). The implementation of aggressive "everydaylow-pricing" strategies by discounters also contributes to the rigidity of consumer prices (Weber and Anders, 2007). Weber and Anders (2007) Meat wholesalers 1,285…”

“…The implementation of aggressive "everydaylow-pricing" strategies by discounters also contributes to the rigidity of consumer prices (Weber and Anders, 2007). Weber and Anders (2007) Meat wholesalers 1,285…”

Price Rigidity and Monetary Non-Neutrality in Developing Countries: Evidence from Nigeria

“…They therefore used data on 350 products from the US retail price index on a monthly frequency and found a higher frequency of adjustment of 4.3 months. In Germany, Weber and Anders (2007) using data on meat products found that the prices of meat products such as beef can remain unchanged for up to 63 weeks. Chakrabarti and Scholnick (2007), also show high price rigidity for online book sellers.…”